The Hamburg property market in 2024: residential market under great pressure, logistics properties more popular than offices
- Industrial and logistics properties dominate transaction activity
- Hamburg office market: demand for smaller spaces, rents continue to rise
- Financiers are acting more restrictively
- Project developers are looking for solutions to realise affordable living space despite the challenging market environment
- Hamburg housing market: further shortage of housing supply causes rents to rise
Hamburg, 19th of April 2024 – The Hamburg property market will remain under pressure in 2024, but is nevertheless in robust shape. On a ten-year average, total transaction activity in the first quarter of 2024 is down by around 58 per cent. Industrial and logistics properties dominate the transaction market and are currently the strongest asset class.
On the office market, however, there were no major lettings in the first quarter. On the investor and tenant side, demand for office space is generally smaller – with rents rising at the same time. In the current market environment, banks are considerably more reluctant to provide property financing and are demanding more collateral and ESG compliance for the properties to be financed. The expected end to the rise in interest rates will allow investors to make more reliable calculations again, meaning that interest in buying on the market will slowly increase. On the residential property market, the declining number of approvals and the decreasing number of new flats being completed are leading to an ever-increasing surplus demand. Project developers are looking for innovative approaches to realise affordable housing construction.
These are the key findings of the press conference ‘The Hamburg property market – outlook 2024’, which was attended by Peter Axmann, Head of Real Estate Clients at Hamburg Commercial Bank, Jörn Stobbe, Spokesman of the Management Board at Becken Holding GmbH, Sascha Hanekopf, Regional Manager in Hamburg at Colliers, and Tobias Kassner, Head of Research and Member of the Management Board at GARBE Industrial Real Estate.
Office market: central location gains in importance
The Hamburg office market was subdued at the beginning of the year, with virtually no transactions in the large space segment. ‘We believe that a take-up volume of between 430,000 and 450,000 square metres is possible by the end of the year,’ says Sascha Hanekopf, Regional Manager in Hamburg at Colliers. The small-scale nature of space lettings is partly due to the coronavirus effect. ‘Since spring 2022, the home office ratio, i.e. the proportion of employees who work at least partly from home, has levelled off at around 25 percent,’ says Hanekopf. ‘With the decreasing demand for space and the persistently difficult economic environment, more office space is gradually becoming available. The vacancy rate has risen by 11.3 per cent compared to the previous year to currently 4.1 per cent.’ Although the vacancy rate has been record-breakingly low in recent years, it still stood at 7 per cent in 2013. At the same time, the demand for space itself is increasing: ‘The importance of central locations has increased enormously. There is a particular demand for modern space in prime locations where new work concepts can be realised,’ continues Hanekopf. The demand for contemporary offices is also causing prime rents to rise further, most recently by 3 per cent year-on-year to EUR 34.5 per square metre.
Average rents rose by 1.9 per cent to EUR 21.4 per square metre in the same period. ‘There has already been a 53.2 per cent decline in office completions. This means that the supply of modern office space will become scarcer in the future, which will have a further effect on the development of rents,’ explains Hanekopf.
Logistics space is in short supply
Hamburg’s logistics property market is one of the top five locations in Germany. Space is not only attractive in the port and Hamburg city centre, but also in the immediate surrounding area. However, demand continues to exceed supply: ‘Hardly any new space is coming onto the market. Accordingly, the vacancy rate is approaching zero,’ says Tobias Kassner, Head of Research and Member of the Management Board at GARBE Industrial Real Estate, ’If we want to remain attractive as a business location, politicians urgently need to make changes to the allocation of new space. Logistics space is of central importance for the growth of companies, but also for new relocations. This potential should not be wasted.’
Retail companies and logistics service providers are particularly keen to establish themselves in Hamburg. However, there is hardly any large space available in new properties, especially for logistics service providers.
This is also evident in the letting sector. In the past few months, new lettings have mainly been in existing properties and smaller spaces. In addition, the cost of building new logistics properties has stabilised and even fallen slightly. Kassner explains: ‘Rent increases have been among the highest in Germany in recent years due to the shortage of space and the reorganisation of supply chains, especially in Hamburg. However, we have now reached the end of the line for the time being, partly due to the uncertain overall economic situation. Accordingly, the pace of rent increases has slowed. However, as there is hardly any construction going on, this will change as soon as the economy picks up again.’
Logistics properties were able to assert themselves as an asset class for investors in 2023. With low vacancy rates, demand that is still high in relation to supply in many regions and the prospect of further potential for rent increases, they are performing significantly better than office and retail properties, for example. In the first quarter of 2024, this attractiveness is reflected in a strong start to the year. Kassner adds: ‘The Hamburg logistics market has proven to be robust and resilient in recent years. Despite the weakening economy, we expect a further upturn.’
2024 remains a year of transition in the area of financing
Peter Axmann, Head of Real Estate Clients at Hamburg Commercial Bank (HCOB), expects the current interest rate level to remain in the ten-year range in the medium term and construction costs to consolidate at the current high level. Axmann explains: ‘We see 2024 as a transition year. Property values have fallen across the board, but should have largely bottomed out by now. Older offices in secondary locations are the exception, where values could fall by a further 10 to 15 per cent.’ Banks are clearly more cautious when it comes to property financing and are demanding more equity as a buffer in view of further uncertain developments. Overall, interest rates have quadrupled in the past 24 months and capital servicing has doubled. Due to the increased probability of default on property loans, higher risk costs are also being applied – with correspondingly rising margins. Peter Axmann explains: ‘Financiers are currently restrictive when it comes to project developments, and new business as a whole is still restrained. In principle, more equity capital is required on the customer side, regardless of whether it is for project or portfolio financing.’ However, investors are once again able to calculate more reliably and more purchases are gradually being concluded. However, HCOB does not anticipate a significant increase until 2025.
The sustainability and therefore future viability of properties has taken on a central role for financiers, also in order to support the transition of the economy towards greater sustainability. Banks are also obliged to evaluate and improve the financed portfolios according to ESG criteria.
Axmann explains: ‘For the entire property sector, achieving the ambitious climate targets and the associated costs are among the biggest challenges.’ According to a study by McKinsey, the investment requirement for commercial property in the EU is around EUR 3 trillion by 2030.
The general conditions for the Hamburg property market are comparatively stable: ‘The Hamburg property market is less volatile than the markets of many other major cities in Germany, which is why it is popular with investors, especially in times of crisis,’ explains Axmann.
Strong excess demand on the housing market
‘The effects of the 43 per cent year-on-year decline in approvals in 2023 will only become apparent in completions over the next few years,’ says Hanekopf. An improvement in approval figures is not in sight. Approvals peaked in 2017 and have been declining ever since. ‘We are seeing strong excess demand on the housing market in Hamburg. In the last six months, there were only 29 rental flat offers for every 1,000 flat requests in Hamburg. By way of comparison, in less tight housing markets such as Dresden, for example, we registered around 74 offers for every 1,000 people looking for a home in the last six months,’ Hanekopf continued.
The shortage of supply is reflected in the rental trend: new-build rents rose from EUR 17.3 per square metre in the previous year to EUR 18.3 per square metre in the fourth quarter of 2023. The average rent for existing properties rose from EUR 13.1 per square metre in the fourth quarter of 2023 to EUR 13.9 per square metre. At the peak, residential tenants currently pay EUR 19.0 per square metre in existing properties and EUR 24.4 per square metre in new builds.
Developers are looking for innovative solutions to the housing problem
Project developers are caught between the difficult market and interest rate situation and the urgent need to create affordable living space. Jörn Stobbe, CEO of Becken Holding GmbH, says: ‘In a dynamic city like Hamburg, we as project developers are constantly faced with the challenge of mastering the balancing act between sustainability, profitability and social responsibility. In the residential construction sector in particular, we see significant potential to achieve a substantial reduction in construction costs through innovative approaches such as the standardisation and optimisation of construction processes. This will enable us to create high-quality living space while keeping rents down, even in a challenging market environment.’ Stobbe sees leaseholds as a key to this: ‘The allocation of land on the basis of leaseholds is another key factor here. We are aware of the debates surrounding leaseholds. However, it is important to recognise that, when used correctly, leaseholds offer enormous opportunities – as the example of London impressively shows.’ The concept of leasehold is widespread in the UK.
Press contact Becken Holding
c/o RUECKERCONSULT GmbH
Susanne Franz
049 (0) 30 2844987-64
becken@rueckerconsult.de
Press contact Colliers Germany
c/o RUECKERCONSULT GmbH
Sara Singbartl
049 (0)151 276 165 63
colliers@rueckerconsult.de
Press contact GARBE Industrial Real Estate
c/o RUECKERCONSULT GmbH
Susanne Edelmann
Colonnaden 18, 20354 Hamburg
Phone: +49 176 1928 4402
E-mail: edelmann@rueckerconsult.de
About Becken
The owner-managed Hamburg property and investment company Becken has been active in the leading German metropolitan regions since 1978. Becken combines the experience of 46 years of dynamic development with the solidity and financial strength of a family business.
With its Development, Asset, Letting and Investment Management divisions, the Becken Group pursues an integrated business model and successfully combines expertise at all stages of the investment process. In addition, INDUSTRIA, a specialist for private and institutional investments in residential property in economically strong locations, is part of the Becken Group. INDUSTRIA offers a comprehensive package of asset and property management services and complements Becken’s business areas, particularly in the field of regulated capital market products. In addition to the company headquarters in Hamburg, Becken has offices in Berlin, Frankfurt am Main and Munich.
Becken stands for a fast-growing family business, led by a management team that acts flexibly and thinks sustainably. The company’s entrepreneurial aspiration is to master the challenges of project development, revitalisation, sales, investment-ready structuring and property management in a sustainable manner.
www.becken.de
About Colliers International Deutschland GmbH
The property consultants at Colliers have offices in Berlin, Dresden, Düsseldorf, Frankfurt, Hamburg, Cologne, Leipzig, Munich, Nuremberg, Stuttgart and Wiesbaden. The range of services includes the letting, purchase and sale of office, commercial, hotel, industrial, logistics and retail properties, residential and commercial buildings, land and land & forestry, property valuation, financing advice, as well as occupier services, support for companies in operational property management and workplace advisory. Colliers International Group Inc. (NASDAQ, TSX: CIGI) operates worldwide with around 18,000 experts in 63 countries. For the latest information from Colliers, visit www.colliers.de/newsroom or follow us on Twitter @ColliersGermany, Linkedin and Xing.
About GARBE Industrial Real Estate GmbH
GARBE Industrial Real Estate GmbH, headquartered in Hamburg, is one of the leading providers and managers of logistics, light industrial and technology properties in Germany. For more than 30 years, the company has been one of the most important independent co-operation partners for transport and logistics service providers, trade and manufacturing industry. GARBE develops, buys and sells, acquires, lets, manages and finances high-quality commercial properties in attractive national and international transport and industrial locations. With around 6.5 million m² of rental space and a project development pipeline of around 1.9 million m² in Germany and Europe, GARBE currently manages properties and fund assets worth around 10.0 billion euros (as at 31 December 2023).
The information contained in this press release does not constitute an offer for the sale of any type of Hamburg Commercial Bank AG securities. Securities of Hamburg Commercial Bank AG may not be sold in the United States without registration pursuant to US securities legislation, unless such a sale takes place on the basis of relevant exceptional provisions.
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